RNS Number:8045O
Singer & Friedlander Group PLC
19 August 2003
Group Operating Profits by Business Activity
for the six months ended 30 June 2003
30 June 30 June
2003 2002
#'000 #'000
Banking: Core Banking 8,258 7,712
Consumer finance and leasing 3,485 3,064
11,743 10,776
Asset management 1,559 3,635
Other Group income, less costs (Note 1) (2,285) (3,373)
Operating profits from continuing activities, 11,017 11,038
(before taxation, exceptional items and amortisation of goodwill)
Share of profits from associated undertaking (Carnegie) 2,199 4,355
Discontinued activities (Note 2) 886 2,573
Group operating profits (before taxation, exceptional items and 14,102 17,966
amortisation of goodwill)
Amortisation of goodwill 501 723
Group operating profits (before taxation and exceptional items) 14,603 18,689
Notes:
1. Other Group income, less costs comprises:
30 June 30 June
2003 2002
#'000 #'000
Interest income 590 1,632
Losses on investments (403) (963)
187 669
Central Costs (2,472) (4,042)
(2,285) (3,373)
2. Discontinued activities comprise:
30 June 30 June
2003 2002
#'000 #'000
Property trading and investment 886 3,939
Singer & Friedlander Factors -- (1,366)
886 2,573
Chairman's Interim Statement
By comparison with the latter part of last year, the first half of 2003 saw no
material improvement in the trading environment in which your Group operates.
The successful prosecution of hostilities in Iraq eliminated a major uncertainty
that was overshadowing confidence, but the underlying outlook for economic
strength remains fragile, both in the UK and globally. The UK market, on which
the fortunes of our asset management business are closely dependent, has, for
much of the period, been below its end 2002 level although it is encouraging
that by 30 June 2003 the lost ground had been recovered. Our banking activities
made good progress in an economic climate which continues to be sustained to a
significant degree by a benign interest rate environment.
Group operating profits amounted to #14.6 million (2002: #18.7 million). Our
share of the profits from our investment in Carnegie declined from #4.4 million
for the first half of 2002 to #2.2 million. Group operating profits include
earnings of #0.9 million (2002 : #3.9 million) from our property investment and
trading activities, which we decided to discontinue in the second half of last
year.
Earnings per share (diluted under IIMR guidelines) amounted to 5.31p compared to
6.67p for the first six months of 2002.
As we indicated in our 2002 Report and Accounts, your Board intends to base
dividend payments by reference to the after tax earnings of the Continuing
Group. By reference to those earnings, the Board would announce an interim
dividend for 2003 amounting to 2.5p per share, 1.7 times covered by the after
tax profits of the Continuing Group for the six months ended 30 June 2003.
However, as was noted in our 2002 Report and Accounts, the amount of the capital
gains tax liability arising from the disposals of Collins Stewart and Carnegie,
in 2000 and 2001 respectively, were under discussion with the Inland Revenue;
this matter has now been settled and has resulted in a tax repayment of #12.9
million which is accounted for as an exceptional credit in the half year
accounts. The Board has decided that, taking into account the Group's strong
capital position, the tax refund should be returned to shareholders by an
enhancement of 6.5p per share to the interim dividend, making a total payment of
9.0p per share. The dividend will be paid on 19 September 2003 to shareholders
who are on the register on 29 August 2003.
Composition of the Board
As we announced on 24 June 2003, Michael Gibbins, our Finance Director and Chief
Operating Officer will retire from the Board at the end of this year having
reached his normal retirement age. We have appointed Tony Shearer to succeed Mr
Gibbins; he joined your Board on 1 July and will take over the executive
responsibilities of Finance Director and Chief Operating Officer on 1 September.
Mr Shearer, who is a chartered accountant, has previously held senior positions
with Old Mutual International and M&G Group PLC.
We have also strengthened and broadened the range of experience on the Board
with two further non-executive director appointments. Richard Bernays has spent
his career in the asset management industry, in very senior positions, and his
experience in one of our core business activities will be a particularly
valuable ingredient in the Board's deliberations. Sarah Rutherford manages her
own consultancy company which specialises in employment related issues, an
aspect of our business which is of critical and ever increasing importance.
Outlook
The Group is strongly capitalised and we are well placed to benefit from any
improvement in business sentiment and any opportunities which may arise.
P E Selway-Swift
Chairman
19 August 2003
Chief Executive Officer's
Review of Operations
In difficult conditions the operating profits earned by the Continuing Group
amounting to #11.0 million were at the same level as those for the first half of
2002 excluding the now discontinued property investment and trading activity.
Banking
The aggregate operating profits from our Banking activities, comprising our core
banking business in the UK and the Isle of Man and our consumer finance and
leasing operations, amounted to #11.7 million for the six months ended 30 June
2003, an increase of 9% over the #10.8 million earned in the first half of 2002.
Advances and interest earning assets amounted to #1,257 million at 30 June 2003,
an increase of 8% during the six months then ended.
Our core banking business in both locations has continued the pattern of profits
growth achieved in recent years. Operating profits from this activity for the
first half of 2003 amounted to #8.3 million after charging net provisions of
#2.0 million (2002 : nil) compared with #7.7 million in the corresponding period
last year. The growth in profits has been particularly driven by our private
banking operations; private banking advances at 30 June 2003 amounted to #209
million, representing some 28% of core banking advances, compared with #135
million at 30 June 2002.
At 30 June 2003, the interest earning assets of our consumer finance and leasing
businesses amounted to #518 million, equivalent to some 40% of the total book
and 7% higher than at 31 December 2002. Operating profits from these businesses
for the first six months of 2003 amounted to #3.5 million (2002: #3.1 million).
Our general leasing business based in London and our healthcare equipment
leasing company both performed very strongly in the first half of 2003. On the
other hand our leasing business in Scotland and our car finance operations
experienced difficult and competitive trading conditions. Our insurance premium
financing subsidiary consolidated its book following the difficulties with a new
product launch as referred to in our 2002 Report and Accounts.
Asset management
The operating profits of our asset management business for the six months ended
30 June 2003 amounted to #1.6 million, a decline of 57% from those for the first
half of 2002. That reduction is obviously disappointing, but should be viewed in
the context of the levels of the major markets, particularly those in the UK.
The level of the FTSE 100 on the key management fee charging dates of 31 March
and 30 June 2003 was 3,613 and 4,031 respectively compared with 5,272 and 4,656
on the same dates in 2002.
Management fee income representing 79% of total revenue in the first six months
of 2003 was 20% lower than that for the first half of 2002 directly reflecting
the lower levels of the relevant markets. Funds under management at 30 June 2003
amounted to #2.6 billion compared with #3.2 billion at the end of June 2002. Our
private clients, the nexus of our business, have generally stayed loyal to us
during the difficult period of the last two years which is a tribute to the
close and positive relationships generated by our fund managers. We were
disappointed to lose a number of institutional mandates in the first half of
2003 principally due to changes in strategy by the consultants involved and
asset allocation shifts by the underlying clients. However, these losses have
been partially offset by some smaller mandate gains for our institutional
business.
We continue to be alert to opportunities for increasing the size and
profitability of our asset management business through the acquisition of
individuals and teams. At the same time, we pay close attention to the cost
structure of the business and, during this half year, have undertaken a major
consolidation of our retail funds which will be finalised later in the year.
Despite the difficult trading conditions which continue to persist, we are
committed to the development and growth of the business and are well placed to
capitalise on any improvement in investor confidence and sentiment.
Carnegie
Carnegie's net profit before tax for the six months ended 30 June 2003 amounted
to #7.1 million, a decline of 54% in local currency terms from the first half of
2002. Our share of those profits amounted to #2.2 million.
The Nordic markets, in which Carnegie operates, continue to be depressed
although some upward momentum has been seen in the second quarter of 2003.
Despite that, stock exchange turnover in that quarter was some 22% lower than in
the same period in 2002. Investment banking activity, measured by reference to
completed transactions in the region as a whole in the first half of 2003, was
less than half that in the corresponding period of the previous year. As a
consequence, Carnegie's total revenues show a decline of 22% although this has
been partially mitigated by a reduction of some 17% in total expenses.
As we have previously stated, we are not long term holders of our 30.85% stake
in Carnegie and intend to dispose of it, in whole or in part, as and when the
Board and our advisers judge that market conditions are appropriate. In
compliance with Carnegie's own dealing regulations, our opportunities for
disposal are limited to the six weeks following each of Carnegie's quarterly
trading statements. The market value of our holding in Carnegie at the close of
business on 15 August was #127 million.
John Hodson
Chief Executive Officer
19 August 2003
SINGER & FRIEDLANDER GROUP PLC
Consolidated Profit and Loss Account
For the six months ended 30th June 2003
AUDITED
2002
2003 2002 FULL YEAR
UNAUDITED #000 #000 #000
Interest receivable:
Interest receivable and similar income arising from debt securities 11,818 13,090 25,736
Other interest receivable and similar income 59,729 50,759 107,485
Less: Interest payable (33,168) (30,795) (63,681)
NET INTEREST INCOME 38,379 33,054 69,540
Dividend income from equity shares - - 2
Fees and commissions receivable 15,441 19,228 37,117
Less: Fees and commissions payable (4,197) (2,006) (6,317)
Dealing profits 1,593 5,026 5,283
Defined benefit pension schemes - other finance income (38) - 157
Other operating income 762 756 1,797
13,561 23,004 38,039
OPERATING INCOME 51,940 56,058 107,579
Administrative expenses (2002 Full Year - net of #7,715,000 (29,060) (32,472) (53,600)
exceptional pension credit)
Depreciation and amortisation - Tangible assets (7,322) (5,914) (12,463)
- Goodwill (194) (212) (427)
- Negative goodwill 695 935 1,913
Provisions for bad and doubtful debts (2,150) (2,328) (4,511)
Provisions for commitments and contingencies - - (2,250)
Amounts written off fixed asset investments (1,457) (1,800) (2,729)
GROUP OPERATING PROFIT 12,452 14,267 33,512
Share of profit from associated undertakings 2,199 4,422 7,292
PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS AND TAXATION 14,651 18,689 40,804
Continuing operations (restated - Note 5) 13,765 16,116 37,699
Terminated activities (restated - Note 5) 886 2,573 3,105
Non-operating exceptional items (Note 2) - 127 566
PROFIT ON ORDINARY ACTIVITIES AFTER EXCEPTIONAL ITEMS BUT BEFORE 14,651 18,816 41,370
TAXATION
Taxation on ordinary activities excluding exceptional items (3,172) (3,690) (7,761)
Share of associated undertakings' taxation (671) (1,357) (1,917)
Taxation on non-operating exceptional items (Note 2) 12,932 (75) (411)
9,089 (5,122) (10,089)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 23,740 13,694 31,281
Minority Interests - equity (38) - (79)
PROFIT FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS 23,702 13,694 31,202
Dividends (17,381) (8,641) (19,175)
RETAINED PROFIT FOR THE PERIOD 6,321 5,053 12,027
Earnings per share excluding exceptional items and goodwill (under IIMR Guidelines)
- Basic 5.33p 6.74p 15.40p
- Diluted 5.31p 6.67p 15.29p
Earnings per share
- Basic 12.31p 7.14p 16.26p
- Diluted 12.26p 7.07p 16.13p
Consolidated Statement of Total Recognised Gains and Losses
For the six months ended 30th June 2003
2002 AUDITED
Restated 2002
2003 Note 4 FULL YEAR
UNAUDITED #000 #000 #000
Profit for the period attributable to shareholders 23,702 13,694 31,202
Revaluation of properties - - 164
Foreign exchange revaluation differences 1,001 2,671 2,498
Actuarial loss on pension scheme - net of tax (4,589) (738) (6,302)
Total recognised gains and losses for the period 20,114 15,627 27,562
Prior year adjustments :
Adoption of FRS 17 (24,201) (24,201)
Adoption of FRS 18 (652) (652)
Adoption of FRS 19 4,377 4,377
Total recognised gains and losses (4,849) 7,086
Consolidated Balance Sheet
AUDITED
30th June 30th June 31st Dec
2003 2002 2002
Restated
Note 4
UNAUDITED #000 #000 #000
ASSETS
Cash and balances at central banks 451 4,440 167
Loans and advances to banks 324,966 268,313 405,821
Loans and advances to customers 1,182,845 985,830 1,097,012
Debt securities 605,975 612,621 443,264
Equity shares 2,877 3,563 2,669
Interests in associated undertakings 23,882 32,268 34,584
Intangible fixed assets - Goodwill 7,492 7,925 7,686
Intangible fixed assets - Negative goodwill (2,021) (3,374) (2,716)
Total intangible fixed assets 5,471 4,551 4,970
Tangible fixed assets 116,631 91,699 106,916
Other assets 43,560 33,469 28,507
Prepayments and accrued income 17,737 17,861 18,796
Total assets 2,324,395 2,054,615 2,142,706
LIABILITIES
Deposits by banks 438,485 409,382 385,057
Customer accounts 1,391,348 1,130,048 1,223,197
Settlement balances - 1,054 -
Debt securities in issue 86,147 94,571 140,076
Other liabilities 51,427 49,691 42,811
Accruals and deferred income 22,878 23,367 24,683
Provisions for liabilities and charges - deferred taxation - 296 170
Pension scheme liabilities - net of deferred tax 7,971 24,938 3,372
Minority interests - equity 214 187 199
Called up share capital 23,110 23,013 23,104
Share premium account 129,099 128,215 129,054
Capital redemption reserve 4,240 4,240 4,240
Revaluation reserve 7,221 7,057 7,221
Profit and loss account 162,255 158,556 159,522
Equity shareholders' funds 325,925 321,081 323,141
Total liabilities and shareholders' funds 2,324,395 2,054,615 2,142,706
MEMORANDUM ITEMS
Contingent liabilities :
- acceptances and endorsements 69,825 71,381 78,423
- guarantees and letters of credit 53,906 45,514 46,457
123,731 116,895 124,880
Commitments 236,369 238,524 243,523
Consolidated Cash Flow Statement
AUDITED FULL
YEAR
30th June 30th June 31st Dec
2003 2002 2002
For the period ended 30th June 2003 #000 #000 #000
UNAUDITED
NET CASH FLOW FROM OPERATING ACTIVITIES (Note 6) 200,216 19,897 (122,188)
DIVIDENDS FROM ASSOCIATES 13,181 12,287 12,287
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid on debenture stock (1,318) (1,318) (2,637)
NET CASH FLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF (1,318) (1,318) (2,637)
FINANCE
TAXATION
UK corporation tax paid (145) (9,031) (15,582)
Overseas tax paid (141) (689) (489)
TAXATION PAID (286) (9,720) (16,071)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (17,339) (9,115) (31,044)
Proceeds from sale of tangible fixed assets 288 1,218 1,519
Purchase of investment securities (327,109) (135,907) (247,795)
Proceeds from sale and maturity of investment securities 158,877 130,802 409,902
NET CASH FLOW FROM CAPITAL EXPENDITURE AND FINANCIAL (185,283) (13,002) 132,582
INVESTMENT
ACQUISITIONS AND DISPOSALS
Purchase and further investment in subsidiary undertakings - (110) (125)
(net of cash acquired)
Net proceeds from sale of investment in group and associated - 244 948
undertakings
NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS - 134 823
EQUITY DIVIDENDS PAID (10,590) (12,484) (21,116)
NET CASH FLOW BEFORE FINANCING 15,920 (4,206) (16,320)
FINANCING
Issue of ordinary share capital 51 36 696
NET CASH INFLOW FROM FINANCING 51 36 696
NET CHANGE IN CASH (Note 7) 15,971 (4,170) (15,624)
Notes to the Interim Financial Information
1. The interim results set out do not comprise full financial statements within the meaning of the Companies Act 1985.
The financial information for the 6 months ended 30th June 2003 has been prepared on the basis of the accounting
policies set out in the Group's Annual Report and Accounts and is unaudited. The comparative figures for the financial
year ended 31st December 2002 are not the company's statutory accounts for that financial year. Those accounts have
been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
2. The composition of pre-tax non-operating exceptional items is set out below :
Audited
2003 2002 2002
Interim Interim Full Year
#000 #000 #000
Net profit re sale/closure of subsidiary/associated undertakings - 458 915
Loss on sale of investment properties - (331) (349)
- 127 566
Exceptional tax credit
As disclosed in note 11 of the Group's 2002 Report and Accounts, as at 31 December 2002 the tax payable on the
disposal of Collins Stewart in 2000 and the part disposal of Carnegie in 2001 had still to be finalised. The tax
liability on these disposals has now been agreed with the Inland Revenue with the result that the Group has received a
net repayment of #12,932,000.
3. Earnings per share are calculated by reference to the profit attributable to shareholders of #23,702,000 (2002:
#13,694,000) and on a weighted average of 192,556,890 (2002:191,760,981) shares in issue during the period. The
Institute of Investment Management and Research Headline Earnings are calculated excluding all non-operating
exceptional items.
4. The balance sheet and statement of total recognised gains and losses at 30th June 2002 have been restated to
reflect the adoption of FRS 17 and 18. The impact of FRS 17 and 18 on the profit and loss account for the 6 months
ended 30th June 2002 was not material. The balance sheet at 30th June 2002 has also been restated to reflect the
offset between UK deferred tax assets and liabilities.
5. Terminated activities for June and December 2002 have been restated to include the results from property trading
and investment activities.
6. Reconciliation Of Group Operating Profit To Net Operating Cash Flows
FULL YEAR
30th June 30th June 31st Dec
2003 2002 2002
#000 #000 #000
Group operating profit 12,452 14,267 33,512
Change in prepayments and accrued income 1,059 1,695 760
Change in accruals and deferred income (1,806) (5,820) (4,503)
Interest on debenture stock 1,318 1,318 2,637
Provision for bad and doubtful debts 286 414 842
Amortisation of premiums and discounts 205 233 498
Depreciation - tangible assets 7,350 5,932 12,499
Amortisation - goodwill (501) (723) (1,486)
(Profit) on sale of tangible fixed assets (14) (9) (18)
Loss on sale of, and provisions against, fixed assets - investments 1,457 1,800 2,729
Change in other assets 1,434 30,717 34,528
Change in other liabilities and provisions (4,791) (2,902) 2,841
Change in pension scheme liability 19 - (38,608)
Foreign exchange movement 390 1,034 2,103
Net cash flow from trading activities 18,858 47,956 48,334
Net (increase)/decrease in:
Loans and advances to customers (70,811) (32,798) (132,145)
Loans and advances to banks 96,542 14,178 (130,511)
Non investment securities 3,286 1,569 2,131
Hire purchase receivables (15,308) (16,857) (29,120)
Net increase/(decrease) in:
Deposits and customer accounts 221,579 (6,201) 62,623
Certificates of deposit in issue (53,930) 10,996 56,500
Settlement balances - 1,054 -
Net cash flow from operating activities 200,216 19,897 (122,188)
7. ANALYSIS OF CHANGES IN CASH DURING THE PERIOD
30th June 31st Dec
2003 2002
#000 #000
Balance at 1st January 30,909 46,533
Net cash flow 15,971 (15,624)
Balance at 30th June 2003 46,880 30,909
8. ANALYSIS OF CASH BALANCES
30th June 31st Dec
2003 2002 CHANGE
#000 #000 #000
Cash and balances at central banks 451 167 284
Loans and advances to banks - repayable on demand 46,429 30,742 15,687
46,880 30,909 15,971
9. Interim Dividend
The Directors recommend the payment of an interim dividend of 9.0p per ordinary share in respect of the period ended
30th June 2003 (interim dividend in respect of the period ended 30th June 2002, 4.5p per ordinary share). The interim
dividend will be paid on 19th September 2003 to shareholders who appear on the register of members at the close of
business on 29th August 2003.
10. Other information
The Company will be circulating the Interim Report to shareholders shortly and copies will also be available from the
Registered Office of the Company, 21 New Street, Bishopsgate, London EC2M 4HR
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